What is Bitcoin?

Bitcoin is a software program that anyone can use. It is software that enforces a set of monetary rules without any central authority.

It is specifically designed to replace central banks such as the Federal Reserve, Bank for International Settlements and International Monetary Fund. The software has the components needed to replace these organizations with a fair and open protocol. No longer can the creation of money be controlled by individuals and corporations who are not elected. Banks are the creators of money in the current system by issuing loans. If a bank fails, the Federal Reserve prints money to save the bank and pay depositors. Who Decides to Print Money in the U.S.? We see this happening again with the recent failures of Silicon Valley Bank and Signature bank. A repeating pattern of bank failures over the last 50 years shows up in the media each with a different flair and a new way to resolve and fix the issue.

Bitcoin fixes the problems of centralized control of money by focusing on decentralized control and protecting the timechain. It does this with 5 main components.

  • The bitcoin token – is an output of the software that is stored in an address and can be transferred from one address to another
  • Cryptography – used to ensure moving bitcoin to another address was authorized by the rightful owner
  • Timechain – a record of all bitcoin transactions (aka blockchain). View the timechain live at mempool.space
  • Consensus policy – ensures all participants agree on the order of the blockchain. Individuals operate the bitcoin software on computers in their homes and businesses across the globe.
  • Token policy – controls
    • how many bitcoin tokens will exist (21 million)
    • timing of new blocks added to the chain
    • proof of work required to add a new block
    • amount of new tokens issued to a block builder

Bitcoin is for anyone and everyone, where do you fit in?

  • User – owns bitcoin in a wallet stored in a bitcoin address
  • Programmer – updates the bitcoin software
  • Node operator – runs the bitcoin software but does not participate in building blocks
  • Block builder – runs additional software to create blocks for the chain

Bitcoin software allows all people of planet Earth to participate. No single participant has influence or control. Programmers can make changes to the software, but node operators are not required to upgrade. Block builders can all conspire to control the timechain, but the bitcoin software running on nodes reject blocks that do not follow the software rules they are running. Every user is incentivized to cooperate which protects their own bitcoin.

When you buy or earn bitcoin, you are opting into a monetary system with transparent rules that cannot be controlled by governments, banks or anyone with large amounts of bitcoin. You are opting into a monetary system where creating money requires work and electricity. Bitcoin is not an investment for you to make money, it is an immutable monetary policy, programmable money, and digital property secured by energy that will take humanity forward for the next ten thousand years.

For some people, reading the above doesn’t convey what bitcoin does the way a video does with graphics. So, this short 5 minute video gives a non-technical explanation. The same author has another short 5 minute video with a more technical overview. If you would like to take a deeper look at the programming code of bitcoin, our research page has a code walkthrough with a cryptocurrency programmer.

Its one thing to read or watch a video, but how do you know its real? If bitcoin is software, how do you use that software?

  • You can run bitcoin on your home computer, this quick tutorial video explains how to download and install bitcoin core. Keep in mind that bitcoin is a 24/7/365 running software, so if you turn off your computer every night, the software will take some time to re-synch the timechain.
    • Great side project to learn how the early days of bitcoin users managed their bitcoin transactions, private keys, and Unspent Transaction Outputs (UTXOs).
  • You can run bitcoin on a dedicated tiny computer that you can build yourself with parts purchased all from amazon. If you like to tinker, this is a great project.
  • You can run bitcoin on a virtual machine and download and build bitcoin from source code directly from github. If you want to see it, watch this video. Warning! this is for programmers and those with technical computer skills.
    • Even if you do not understand anything technical related, the point you should get from watching it is that you do not need permission from anyone to do it. The bitcoin software cannot be stopped.
  • You can use a third party service provider, such as LunaNode, which hosts this website.

The above options are not required at all for you to do. The options for you to use the bitcoin software are available, without permission. There are additional options, which you will learn and use by following the Bitcoin Mastery Checklist.